Chancellor Sajid Javid announced £350m would be committed to ensuring the completion of the hospital as Sandwell NHS trust's business case was formally signed off.
It clears the way for work to restart on the project after months of waiting for trust bosses.
Construction is expected to resume in December, almost two years on from the collapse of Carillion which plunged the scheme into crisis.
The trust is aiming to have the Midland Met open by April 2022.
Mr Javid said: "It is absolutely right that the Midland Metropolitan Hospital is completed so that doctors and nurses working for our NHS across the West Midlands can deliver excellent care in brand new, state-of-the-art facilities.
"This investment of £350 million will help deliver on the people's priorities of improving the NHS and levelling up services available across the country."
Toby Lewis, chief executive of the Sandwell and West Birmingham NHS Trust, which will run the hospital, said: “Midland Met is a vital regeneration project for Smethwick, and part of the wider Commonwealth Games development across Birmingham, including Perry Barr.
“We are working hard to open the hospital in 2022, and getting Balfour Beatty on site from December is a key step in that journey.
"Today’s announcement by the Treasury is hugely welcome news.
"We are working round the clock to conclude commercial close, and the agreement of the final business case and appointment of a preferred bidder is the last national approval hurdle overcome.”
The Midland Met, which is around two-thirds built on Grove Lane, Smethwick, is set to transform healthcare in Sandwell and Birmingham and result in both Sandwell and City hospitals being scaled down.
However, healthcare benefits have been overshadowed by delays as the project has lurched from one crisis to another.
Balfour Beatty, which has been carrying out remedial works over recent months after the unfinished hospital was left to the elements, will complete the job.
A construction contract, the final hurdle to having workers back on site, is expected to be signed with the company in the next few weeks.
West Midlands Mayor Andy Street, who has held meeting with Chancellor Sajid Javid and Health Secretary Matt Hancock over recent weeks in attempt to get the project moving, welcomed the announcement.
He said: “I am delighted that work on the Midland Met hospital is to finally resume and that the Government has put a substantial amount of money on the table to make this happen.
“Not only will the hospital bring the most modern healthcare to citizens of Sandwell and West Birmingham, but it will also pave the way for significant regeneration of the Smethwick area. It is crucial that the hospital is ready for the Commonwealth Games, and Government’s announcement today has made that possible after months of uncertainty.
“I now look forward to seeing work on the site progress rapidly ahead of the much-anticipated opening in 2022."